A Healthy Dose of BPO | Article

medical outsourcing - outsouricng healthcareInformation in a hospital can literally mean life and death. That’s why the University Health Network (UHN), the largest hospital system in Canada, decided to reengineer its health care system to best serve its patients.

In 1994 UNH decided “to move aggressively to electronic patient records,” according to Matthew Anderson, chief information officer for UHN. The goal was to transfer X-rays, charts, and lab results, along with other patient information, into a database that was accessible to any health care professional working at any of the Network’s three teaching hospitals in Toronto.

That meant UHN needed an extraordinarily reliable data network which had to be up close to 100 percent of the time. If a critically injured patient arrives at 2 a.m., the attending physicians can’t wait until the next business day for patient information if the system happens to be down. “Information at a hospital is as critical at midnight as it is at noon,” says Anderson.

At that time the hospital was still using a mainframe. In 1995 it transferred its records to a client-server system. This new method of hosting required a different support system to manage the 4,200 Pentium workstations across four sites. The IT department realized it would have to make a significant investment in a monitoring and tracking system to support the new system properly.

Anderson says the hospital began to consider outsourcing when it discovered it had a recruitment problem. The hospital had little trouble recruiting capable young engineers for its IT group. But when they reached a certain point in their careers, they would leave the hospital to work for an IT company. The hospital couldn’t staunch the bleeding. Outsourcing solved the exodus problem.

Outsource The Entire Process

Unfortunately, the first outsourcing relationship became a bitter pill to swallow. The first problem was the hospital only outsourced some but not all of its network support. In hindsight, not outsourcing the entire process was a big mistake. Anderson says every time there was a network problem “we’d spend the first two hours pointing fingers to determine whose fault it was.”

The second difficulty was the “extraordinarily rigid contract.” The outsourcing provider had not priced the contract properly and was making very little profit, according to Anderson. Whenever UHN wanted to make a change, the provider tried to make up its losses with “exorbitant” prices. This became a major problem because the rise of the Internet happened at this time. UHN could not take advantage of Web-based applications.

The result: the IT network was unreliable. Whenever Anderson went to discuss strategic issues with the chief of surgery back in March 1998, he found himself spending the first 45 minutes of the meeting trying to download the surgeon’s email.

When the first company’s contract was up, the hospital network issued a Request For Proposal and short listed its candidates to three companies. It also hired Compass, an outsourcing consultant, to help it evaluate the proposals. “That was the smartest thing we did. If I could give just one piece of advice to anyone going into outsourcing, it would be hire a consultant who knows your industry,” Anderson says.

Compaq Turns Things Around

UHN selected Digital Equipment Corporation because its management team “was eager to create a partnership.” One week before it signed its $25 million (CD) five year contract, Compaq purchased Digital in June 1998.

The partnership theme continues half way through the contract. “Compaq’s attitude toward our partnership has been service first and dollars second. And they have promoted flexibility, not tried to restrain it,” says Anderson.

He also reports it takes a lot of energy to manage an outsourcing agreement. His job is making sure the hospital network is executed exactly the way it needs to be. “You don’t hire a provider to manage network and then forget about it. Outsourcing does not abdicate your responsibility,” he says.

Both partners built a supporting structure to ensure the relationship would work. The higher ups of both companies meet once a quarter to discuss strategy sessions, looking at what they should do next. The operational managers also meet to work out the day-to-day operational details.

Another reason the parties get along so well is that they penned the contract “as if we hate each other – because that’s the only time you pull out the contract.” Anderson says at the beginning of every outsourcing relationship, both parties are on their best behavior and give each other the benefit of the doubt. Although it’s difficult, he says the best way to start a relationship is thinking about how you will break up.

Clear Expectations Are Necessary For Success

Compaq’s first task was to get desktop support and the help desk under control. Compaq did this professionally and with dispatch, which created a great deal of user credibility for them and the IT department.

The hospital learned from its first experience and created very specific service levels. They cover four pages in the contract. However, there are only 10 key metrics which have dollar amounts attached to them. If Compaq misses a metric, UHN receives a credit on the next month’s bill. But Compaq can earn credits if it surpasses the agreed upon service levels.

Anderson says the service levels work well because “we clearly identified our expectations.” Compaq knew exactly what UHN expected it to deliver.

To date, the UNH has about half of its patient information in an electronic format. The goal is to not have a single piece of paper in the hospital by 2005. “That would only be a dream without Compaq. But we are confident we can make that happen with Compaq’s expertise,” says Anderson.

Lessons from the Outsourcing Primer:

  • Outsource an entire process. When you retain part of the process in-house, it leads to finger pointing whenever there is a problem.
  • Have clear metrics. But only attach dollar penalties to the most important ones.
  • Flexibility in a contract is crucial to accommodate any changes in business like the Internet.
  • Outsourcing providers must make a profit on their contract or the partnership won’t work.
  • Chose a provider who wants to partner with you and understands your business goals.


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